$50 Billion Worth Of Tax Breaks Expire

Subsidies for wind farms were among the tax breaks that expired on Jan. 1.

Sandy Huffaker
/ AP

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Originally published on January 9, 2014 7:36 pm

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ROBERT SIEGEL, HOST:

At the stroke of midnight on New Year's Eve, a bevy of tax breaks expired in Washington D.C., everything from a tax benefit for people who commute to work using mass transit, to a subsidy for NASCAR racetracks. Some of these are probably less crucial for the national economy, but others are vital to the health of certain industries. At least that's what the businesses that benefit say, as NPR's Chris Arnold has been finding out.

CHRIS ARNOLD, BYLINE: In all, more than 50 different tax breaks expired at the end of the year. And if Congress doesn't vote to extend them, many companies and millions of average Americans will be paying higher taxes - by one count, $50 billion a year more. The list includes students who write off tuition, underwater homeowners and clean energy companies.

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ARNOLD: An animated video on the company Sieman's website shows offshore wind-farms withstanding big storms at sea, complete with heroic music. Company executives also tout a recent order for new wind turbine blades, calling it the biggest order of its kind in history.

ROB GRAMLICH: Actually if you were to stack the blades end to end it would be almost 45 miles.

ARNOLD: A factory in Iowa will build all those, which the governor there is happy about. But new construction in this industry has been getting a big boost from one of these tax breaks that just expired.

GRAMLICH: Most people don't realize how important our tax policy is for our energy strategy of the country.

ARNOLD: Rob Gramlich is a vice president with the American Wind Energy Association. He says something called the Production Tax Credit gives federal money to companies that generate clean energy. That allows them to sell electricity cheaper so that they can compete with fossil fuels. And he says this is such a big deal that when this subsidy has expired in the past new construction has crashed.

GRAMLICH: Wind energy development in the country has dropped, year on year, from 70 to 90 percent. It really is disruptive each time the credit expires. And just a year, year and a half ago, we were in a situation where literally tens of thousands of jobs were being lost. People were being laid off left and right.

ARNOLD: After that happened the subsidy got extended and the industry is now lobbying for another extension.

Some economists like these targeted tax incentives because they think they foster the growth of industries and technologies that will be good for the country. Likewise, giving people a tax break to save money for retirement encourages them to do that and that's good. But other economists don't like any tax credits or tax breaks at all.

JOHN MAKIN: I certainly am for the simpler system.

ARNOLD: John Makin is an economist with the conservative-leaning American Enterprise Institute. He thinks the government should get rid of all tax breaks. And with the money that it's saved it could lower tax rates for ordinary people. And he says that that would boost the economy.

MAKIN: If you phase out all the tax breaks - those for saving, those for housing, all wonderful ideas - and give people lower marginal rates, they'll end up better off.

ARNOLD: Basically, Makin doesn't trust the government to make good decisions about which industries or behaviors should be promoted through tax breaks.

MAKIN: You push one lever and a lot of other things happen.

ARNOLD: For example, decades ago, the government said employees who got free parking at work didn't have to pay taxes on that perk. But that incentivized driving over mass transit.

Larry Filler is a transportation consultant. He helped to champion another tax break to encourage more people to ride the train to work. But part of that just expired so now we're back with a bigger subsidy for people who drive cars, which for a transportation consultant is...

LARRY FILLER: Well it's definitely backward. I mean it's one of the most horrendous situations you can imagine.

ARNOLD: So right now in Washington, lobbyists on the left right and center - everyone from big banks to rum distillers in Puerto Rico - are asking Congress to extend the tax breaks that help them.